Accelerate Your Small Business-eBay
Every year there are hundreds of thousands of companies that surface themselves as new small businesses. With that said every year there are also hundreds of thousands of small businesses that close down (1). There are many contributing factors to a successful small business. One of the greatest marketing tools to sweep the retail industry is eBay. EBay has allowed and continues to allow both small businesses as well as individuals to market and sell new goods. EBay has been a great entry point for many small businesses into e-commerce. However, eBay has also led to a problem that manufactures should be aware of, product integrity.
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Small business began offering their new (unused) products on eBay. For the most part eBay was the stepping stone for many small brick-and-mortar companies into ecommerce. For a lot of individuals eBay became the store front of a drop-shipping network.
Many individuals grew small businesses from nothing by the use of drop-shipping. These people were able to sell products with out ever shelling out a single dollar; they never had to purchase any inventory. The way drop-shipping works is that a 3rd party, in this case an individual using eBay, creates an advertisement to sell a product. A customer purchases that product from the 3rd party which simply turns around and places the order with the distributor. That distributor then simply ships the item directly from their warehouse to the customer. So, the 3rd party collects payment from the customer and then uses that capital to pay the drop-shipping company. Therefore they are never shelling out any of their own money.
Drop-shipping companies are becoming very advanced. In most cases, as a customer, you don’t even know that the items you order came from anywhere other than the company you purchased them from. Most drop-shipping companies are putting the return address of the middle man company on the packages, so that it appears to the customer that it came from the company they order it from. Also the drop-shipping companies are including packing slips with the 3rd parties’ logo, return address, policies, and other various company details on them. Everything possible to convince the customer that the order came directly from the company the placed they order with.
In the case of eBay, there are thousands of sellers who are sitting in front of their home computers, merely cutting and pasting buyers’ information from eBay into their drop-shipping distributors’ website. In some cases there are multiple sellers utilizing the same drop-shipping distributors. This raise the question of how are these sellers supposed to compete with each other. In most cases what happens is that very few sellers are able to turn a profit and in the long run they all lose.
What happens is that the more a particular seller buys from a distributor the better pricing they receive. So, instead of keeping their asking price the same and increasing their profit margin, they drop their prices. They drop their prices to under cut their competitors and attempt to turn a profit by moving a large quantity of product. As a result of this a few competitors are eliminated. This process continues as sellers reach new pricing levels with their distributors. Now for the fun part, by nature the more you buy, the cheaper you can purchase the product for. So what ends up happening is that so many large disturbers are buying these products in bulk and turning around reselling them cheaper then everybody else and the product ends up losing its integrity. Many big name companies, especially in the field of electronics, lost their...